Update – June 29, 2011: According to a real estate agent I was speaking with today, the stamp duty increases kicks in for properties that sign a contract AFTER August 1. I had heard from someone else that settlement might have been required before August 1 (they weren’t quite sure), but it looks like settlement can take place after August 1 provided the contracts were signed before then.
In other words, if you were thinking of buying a new property some time soon you might want to buy during the month of July to avoid paying that stamp duty increase.
Earlier this week Queensland Treasurer Andrew Fraser announced that Stamp Duty payable on properties would increase significantly. Given the fragile nature of real estate in Queensland at present, the timing could have been better.
From The Australian:
In the $43 billion Queensland budget unveiled yesterday, the government scrapped the stamp duty concession for people trading up to an existing home. The stamp duty on a $400,000 home will jump from $5250 to $11,825 from August 1.
The $161 million raised in the coming financial year will cover the cost of the abolition of an unpopular $113 levy on electricity bills to fund universal ambulance services.
So the government is scrapping the compulsory ambulance levy, and saying that such a fee is now optional. You can choose not to pay the ambulance levy (“Hoorah!”), but if you do want to pay it, you’ll be paying an extra $4000 to $7000 in the form of increased stamp duty (“Boooo!”.
Obviously real estate agents aren’t impressed. I spoke with three agents yesterday who all expressed their opposition to the increase. From Pamela Bennett, Chairman of the REIQ:
“The market is already the lowest it has been in many years and today’s announcement will just make it worse.
The government is obviously trying to fill the financial void that has been left by the weak property market, and the subsequent lower stamp duty receipts given the marked reduction in property sales over the past 18 months.”
So what will this mean for the real estate industry in Queensland?
It’s hard to tell. I see two options:
1. People may choose to delay selling their property, but if this stamp duty change is permanent then they can’t wait forever. Unless there’s a change of government, of course. So perhaps people will wait until next year to sell, thinking that a new government may reduce stamp duty. If people do this, then there will be less properties on the market, which would ordinarily lead to a stablisation or an increase in property prices.
2. People may also choose to offer a lower price on the purchase price of a property, which effectively means the seller is paying the stamp duty increase. That sounds fine, except then the buyer of a property is also often selling another property, and would have to consider settling for a reduced price on the property they are selling. In other words, they pay for it anyway. If people do this, then obviously there will be a decrease in property prices.
So what do the general public think about this?
This move was obviously introduced as a budget sweetener, intended to show voters that the Queensland Labor Government were doing all they can to help struggling families and pensioners. However, this move seems to have backfired. Here are some comments from online sites …
From The Australian:
“Last night on TV, Bligh looked anything but confident! She’s dead meat and knows it. “
From The Brisbane Times:
“After 40 years voting labor im finnished. No-one in the world can accept this rot. Im voting against you next election Bligh. I apologise to all for voting for you in the last.”
“The market is already depressed and this tax will push prices down ever further – leaving a lot of people with negative equity and unable to move until prices rise to cover their debt.”
So it’s not looking good for Labor in Queensland. But then they’ve looked shaky before, and survived.
Some people are saying that Stamp Duty should have been abolished with the introduction of the GST.
I’ve seen a few comments online from people saying things like, “Does anyone remember that the States were supposed to abolish all stamp duty …” After doing a bit of research, I came across an article from The Age newspaper in 2005:
The Howard Government’s original plan for the GST envisaged the states abolishing a swag of financial taxes, which in effect would be replaced by the GST. They included:
* The financial institutions duty.
* The bank accounts debits tax.
* The NSW accommodation tax.
* Conveyancing duties on transfer of business property.
* A range of other stamp duties on leases, mortgages, sales of shares, cheques and credit arrangements.
Then came the GST deal with the Democrats, which removed the GST on food, knocking a big hole in the revenue forecasts. The Democrats proposed that it be filled by paring back the income tax cuts and increasing taxes on petrol — thereby leaving the original agreement with the states intact.
Howard and Costello chose a different course. They decided to keep the states’ stamp duties to pay for the lower GST collections. Under the new deal announced by Howard on May 31, 1999, just three state taxes were earmarked for immediate abolition: the financial institutions duty, the accommodation tax and the stamp duty on transfer of shares. A fourth tax, the bank accounts debits tax (dubbed the BAD tax) would be removed from July 1, 2005.
But removal of all the stamp duties, including conveyancing duties on business property, were deferred indefinitely.
Otherwise, under the agreement, the Commonwealth would have had to underwrite the costs of abolishing them if GST revenue fell short — something it was unwilling to do.
Despite Costello’s claims, the agreement signed by Howard and the premiers in June 1999 did not commit the states to abolish any stamp duties. Section 5 (vii) stated specifically:
“The Ministerial Council will by 2005 review the need for retention of stamp duty on non-residential conveyances; leases; mortgages, debentures, bonds and other loan securities; credit arrangements, instalment purchase arrangements and rental arrangements; and on cheques, bills of exchange, promissory notes; and unquoted marketable securities.”
The only commitment the states made was to “review the need” for these taxes. Heads of federal and state treasuries have been meeting to do so, and this review will come to a head when the treasurers meet on March 23 (2005).
So yes, in the original proposal stamp duty was going to be removed. However, during negotiations with the Democrats the former Howard Government was forced to remove GST on essential foods, thereby significantly reducing the amount of money coming in from GST. As a result of that, they had to allow the states to leave other taxes present, such as stamp duty on residential property.